Department of Justice Calls for Independent FTX Investigation

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  • The U.S. Trustee has called for an independent investigation into the collapse of FTX
  • The U.S. Justice Department’s bankruptcy watchdog would offer detailed insight into what went wrong at FTX
  • Celsius has an independent investigator examining its own downfall

The U.S. Justice Department’s bankruptcy watchdog, the U.S. Trustee, has called for an independent investigation into the collapse of FTX, saying a neutral party should investigate its downfall. The division, which is the section of the Justice Department that oversees the bankruptcy court, has requested that FTX’s bankruptcy appoint an examiner in the company’s insolvency proceedings, which would publish a public report on FTX’s implosion and look into evidence of wrongdoing.

Examiner Would Get to the Bottom of FTX Wrongdoing

In a filing made yesterday, the Trustee suggest that, “An examiner could — and should — investigate the substantial and serious allegations of fraud, dishonesty, incompetence, misconduct, and mismanagement” by FTX. It also suggested that the examiner probe “the circumstances surrounding the debtors’ collapse, the apparent conversion of exchange customers’ property, and whether colorable claims and causes of action exist to remedy losses.”

The most famous recent example of an independent examiner being appointed was in the collapse of Lehman Brothers, where the examiner eventually published a detailed report explaining what went wrong with the bank, and it appears, on the surface at least, that the FTX collapse is a complicated affair that could certainly benefit from such a perspective.

Creditors Would Appreciate Independent Examiner

FTX’s new management has done “valuable preliminary work” untangling FTX’s myriad problems, the filing stated, but added that “the questions at stake here are simply too large and too important to be left to an internal investigation.” Such an eventuality would please creditors, who will want the most experienced and critical eyes looking at the collapse.

An examiner is also looking into the downfall of crypto lender Celsius, so it would make sense that FTX gets one too.